Penetration is a measure of brand or category popularity. It is defined as the number of people who buy a specific brand or a category of goods at least once in a given period, divided by the size of the relevant market population. Often, managers must decide whether to seek sales growth by acquiring existing category users from their competitors or by expanding the total population of category users, attracting new customers to the market. Penetration metrics help indicate which of these strategies would be most appropriate and help managers to monitor their success. These equations might also be calculated for usage instead of purchase. Penetration: The proportion of people in the target who bought at least once in the period a specific brand or a category of goods.
How to Determine the Penetration Rate for a Business
How to Estimate Market Penetration | cobsys.com
Market penetration refers to the successful selling of a product or service in a specific market. It is measured by the amount of sales volume of an existing good or service compared to the total target market for that product or service. Igor Ansoff first devised and published the Ansoff Matrix in the Harvard Business Review in , within an article titled "Strategies for Diversification". With numerous options available, this matrix helps narrow down the best fit for an organization. This strategy involves selling current products or services to the existing market in order to obtain a higher market share.
The market penetration of a product or service is one of those numbers every small business owner ought to stay on top of. Knowing the percentage of potential customers that have purchased from you lets you know how well you're doing, and how much growth potential your business has. Market penetration always involves a bit of guesswork, but by doing your homework you can come up with a pretty reliable figure. Determine the entity you're going to count as a customer.
Market penetration is a measure of how much a product or service is being used by customers compared to the total estimated market for that product or service. Market penetration can also be used in developing strategies employed to increase the market share of a particular product or service. Market penetration can be used to determine the size of the potential market.